We Think The Compensation For Diversified Royalty Corp.'s (TSE:DIV) CEO Looks About Right
Despite positive share price growth of 8.5% for Diversified Royalty Corp. (TSE:DIV) over the last few years, earnings growth has been disappointing, which suggests something is amiss. These concerns will be at the front of shareholders' minds as they go into the AGM coming up on 28 June 2021. They will be able to influence managerial decisions through the exercise of their voting power on resolutions, such as CEO remuneration and other matters, which may influence future company prospects. From what we gathered, we think shareholders should be wary of raising CEO compensation until the company shows some marked improvement.
View our latest analysis for Diversified Royalty
How Does Total Compensation For Sean Morrison Compare With Other Companies In The Industry?
According to our data, Diversified Royalty Corp. has a market capitalization of CA$325m, and paid its CEO total annual compensation worth CA$1.1m over the year to December 2020. That's slightly lower by 6.1% over the previous year. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$300k.
In comparison with other companies in the industry with market capitalizations ranging from CA$124m to CA$495m, the reported median CEO total compensation was CA$1.0m. From this we gather that Sean Morrison is paid around the median for CEOs in the industry. Moreover, Sean Morrison also holds CA$4.8m worth of Diversified Royalty stock directly under their own name, which reveals to us that they have a significant personal stake in the company.
Component | 2020 | 2019 | Proportion (2020) |
Salary | CA$300k | CA$300k | 27% |
Other | CA$813k | CA$885k | 73% |
Total Compensation | CA$1.1m | CA$1.2m | 100% |
On an industry level, around 43% of total compensation represents salary and 57% is other remuneration. Diversified Royalty pays a modest slice of remuneration through salary, as compared to the broader industry. If total compensation is slanted towards non-salary benefits, it indicates that CEO pay is linked to company performance.
Diversified Royalty Corp.'s Growth
Over the last three years, Diversified Royalty Corp. has shrunk its earnings per share by 20% per year. It saw its revenue drop 1.5% over the last year.
Overall this is not a very positive result for shareholders. And the impression is worse when you consider revenue is down year-on-year. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has Diversified Royalty Corp. Been A Good Investment?
Diversified Royalty Corp. has generated a total shareholder return of 8.5% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. In light of that, investors might probably want to see an improvement on their returns before they feel generous about increasing the CEO remuneration.
In Summary...
Despite the positive returns on shareholders' investments, the fact that earnings have failed to grow makes us skeptical about whether these returns will continue. The upcoming AGM will provide shareholders the opportunity to revisit the company’s remuneration policies and evaluate if the board’s judgement and decision-making is aligned with that of the company’s shareholders.
CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. We did our research and identified 4 warning signs (and 2 which are significant) in Diversified Royalty we think you should know about.
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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